-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WjqQss5519Sjmzu2Dlo6lGXWtCWjiOhgTp5EWP/dck6FPpysb/1OdutCbWn8A9L5 vcyL7icq092QkTK03in+tg== 0001026777-98-000076.txt : 19980909 0001026777-98-000076.hdr.sgml : 19980909 ACCESSION NUMBER: 0001026777-98-000076 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980908 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFL CIO HOUSING INVESTMENT TRUST CENTRAL INDEX KEY: 0000225030 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 526220193 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03493 FILM NUMBER: 98705216 BUSINESS ADDRESS: STREET 1: 1717 K STREET NW STREET 2: STE 707 CITY: WASHINGTON STATE: DC ZIP: 20006 BUSINESS PHONE: 2023318055 MAIL ADDRESS: STREET 1: 1717 K ST NW SUITE 707 CITY: WASHINGTON STATE: DC ZIP: 20006 N-30D 1 AFL-CIO Housing Investment Trust SEMI-ANNUAL REPORT JUNE 30, 1998 PERFORMANCE HIGHLIGHTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998 JUNE 30, 1997 - ---------------------------------------------------------------------------- Net Assets $1.85 billion $1.48 billion Participants investment $122 million $49 million Reinvestment of income $54 million $45 million Investment commitment $194 million $209 million Investment fundings $497 million $187 million Number of participants 401 394 Units of participation 1,663,112 1,368,793 Total gross rate of return, 1-year 10.96% 10.25% REPORT TO PARTICIPANTS The AFL-CIO Housing Investment Trust completed one of its best six-month periods on June 30, 1998. Its performance in the first half of the year,as detailed in this report, was characterized by very strong returns and record growth. Effective management of the portfolio enabled the Trust to surpass industry benchmarks and deliver highly competitive returns to participants, maximizing opportunities for gains in an environment of falling interest rates. This vigorous start has positioned the Trust for one of its strongest years yet, continuing to make it an attractive investment choice for a growing number of pension investors. PERFORMANCE OF THE TRUST The total net assets of the Trust grew by more than 10 percent during the first two quarters of 1998, reaching the new high of $1.85 billion at June 30. Investor confidence was evidenced in the $122 million in new investment brought to the Trust, more than double the figure from the comparable period of 1997. As another sign of confidence in the Trust, its reinvestment rate reached a high of more than 90 percent as participants reinvested more than $54 million in earned income. At midyear, with 13 new participants, the Trust had a total of 401 participating investors. The Trust continued to significantly outperform industry benchmarks. It was able to maximize returns in the low interest rate environment that marked the first half of 1998 by pursuing an effective portfolio management strategy. The Trust's performance at June 30 compared favorably to that of the standard industry indices, both short-term and over longer periods (see table). The Trust's total gross rate of return for the year ending June 30 was 10.96 percent, exceeding that of the Salomon Brothers Mortgage Index (8.85 percent) and the Lehman Brothers Aggregate Bond Index (10.54 percent). At mid-year, the number of outstanding units of participation held by participants totaled 1,663,112. The net asset value per unit of participation grew to $1,110.73 as of June 30, up from $1,104.30 at the end of 1997. [GRAPHIC REPRESENTING 1, 3, 5 AND 10-YEAR PERFORMANCE OF THE TRUST AS COMPARED TO STANDARD INDUSTRY INDICES] 1-year 3-year 5-year 10-year AFL-CIO Housing Investment Trust 10.96% 9.32% 8.20% 10.03% Salomon Brothers Mortgage Index 8.85% 7.88% 6.89% 9.08% Lehman Brothers Aggregate Bond Index 10.54% 7.88% 6.88% 9.07% LOAN PRODUCTION The high pace of loan production activity in the first half of the year has positioned the Trust to make 1998 one of its most productive years on record. During this period, the Trust's management was particularly sensitive to portfolio duration in view of falling interest rates. To enhance value in this interest rate environment, the Trust adjusted the overall duration of the portfolio with the strategic purchase and sale of certain securities. This repositioning of the portfolio, together with vigorous loan production activity, generated $497 million investment fundings during the period. The Trust entered into $194 million in new financing commitments during the first two quarters. A little over half of these commitments, $99 million, will go to develop eight multi-family housing projects. New single-family initiatives forged by the Trust during this period, as discussed below, produced $95 million in commitments -- almost four times the single-family commitments of a year earlier. This was in keeping with the Trust strategy of managing the portfolio duration to maximize returns in changing interest rate environments by securing an appropriate balance between longer-term multi- family investments and shorter-term single-family investments. The financing commitments made during the first half of 1998 are expected to produce more than 1,600 units of multi- and single-family housing. PORTFOLIO MANAGEMENT The Trust's portfolio at June 30 was distributed primarily among mortgage-backed securities (52.3 percent), FHA mortgages (29.5 percent), and FHA construction loans (14.0 percent). The portfolio also included local initiatives (1.5 percent) and short-term investments (2.7 percent). This is shown in the accompanying table. Of HIT's long-term investments, 98.5 percent were insured or guaranteed by the U.S. government or government-sponsored enterprises such as Fannie Mae or Freddie Mac. The continuing strong performance of the Trust reflected the success of its portfolio management strategy. Rigorous monitoring of the portfolio and continual adjustment of duration have enabled the Trust to enhance returns and avoid unrealized losses in value in changing market conditions. Pre-payment lock-out provisions of the mortgage-backed securities held by the Trust for multi-family projects provided a measure of protection against the adverse impacts typically experienced by such securities when interest rates fall. [GRAPHIC OF PIE CHART REPRESENTING PORTFOLIO ALLOCATION AS OF JUNE 30, 1998] Mortgage-Backed Securities 52.3% FHA mortgages 29.5% FHA construction loans 14.0% Short-term investments 2.7% Local initiatives 1.5% Administrative and systems improvements during this period further increased the efficiency of the Trust's management structure and contributed to its strong showing. An expanded cash management system was implemented during the first half of 1998 and was instrumental in achieving the low cash balance of 2.7 percent of total net assets at June 30. Also during this period, the Trust took steps to achieve greater efficiency in managing its growing asset base with the selection of Bankers Trust as the new custodian of HIT assets. The Trust's administrative costs continued to rank among the lowest in the industry, with a ratio of expenses to average net assets of just 40 basis points (0.40 percent) for the one-year period ended June 30. NEW INVESTMENT INITIATIVES The first half of 1998 saw the successful launch of the Homeownership Opportunity Initiative, a $250 million, three-year partnership between the Trust and Fannie Mae. The partnership will provide additional investment opportunities for the Trust in single-family home mortgages and help expand investments in urban areas. At mid-year, the Initiative was underway in the initial cities of Seattle, San Francisco and Boston with the full support of each city's mayor, who will contribute local resources to the program. The Trust also committed $20 million to an innovative single-family endeavor with Freddie Mac in the city of New Orleans, an important step in increasing HIT activity in the South. More than 200 homes will be built or renovated each year under an agreement between the Southeast Louisiana Building and Construction Trades Council and a local community organization that will be the project developer. Both of these single-family initiatives promote housing production and expand homeownership opportunities for low- and moderate-income families, while also helping to revitalize urban neighborhoods. In these and a wide variety of multi-family financing commitments undertaken during the first two quarters, the Trust's technical expertise has made it a resource of growing importance to local and state housing agencies, community groups and developers. These partners look to the Trust not just for financing but for its know-how in executing complex financial transactions. The Trust's new single-family commitments are the first stage in implementing Urban Investment 2000 -- the bold new framework for investment that was approved by the HIT Board of Trustees in April. Other components of Urban Investment 2000 will focus on new multi-family housing activity and supportive housing for the formerly homeless, two areas that offer significant potential for HIT. The forward-looking strategy provides an excellent platform for future growth of the HIT investment program as the Trust approaches $2 billion in assets. FUTURE OUTLOOK The AFL-CIO Housing Investment Trust is well positioned for robust growth and performance in the remainder of 1998 and beyond. The single-family partnerships with Fannie Mae and Freddie Mac have broadened an already extensive network of investment relationships at the national, state and community levels and added an important dimension to the Trust's investment program. Through this and other initiatives to be launched under the banner of Urban Investment 2000, the Trust is laying the groundwork to further expand its pipeline of high quality projects and keep pace with new assets invested in the Trust. By continuing its program of active portfolio management, the Trust will seek to anticipate and respond to changes in the financial markets in order to minimize risk and increase the value of participant shares. We believe the combination of strong performance, an effective management structure, and a proven investment strategy provides a solid foundation for continued success in providing the high security and competitive returns our participants expect. [signature of Stephen Coyle] Stephen Coyle CHIEF EXECUTIVE OFFICER [signature of Michael M. Arnold] Michael M. Arnold DIRECTOR OF INVESTOR RELATIONS [signature of ElChino Martin] ElChino Martin GENERAL COUNSEL [signature of James Campbell] James Campbell CHIEF INVESTMENT OFFICER 1998 PARTICIPANTS MEETING The 1998 Annual Meeting of Participants was held in Washington, D.C. on May 19, 1998. The following matters were put to a vote of Participants, through the solicitation of proxies, at the meeting: Richard Ravitch was re-elected to chair the Board of Trustees by a vote of 954,042.8638 for, 68,273.8616 against, 573.6576 abstentions, and 545,860.9078 votes not cast. The following table details votes pertaining to Trustees who were elected at the Annual Meeting:
- ----------------------------------------------------------------------------- Votes Votes Votes Votes Trustee For Against Abstained Not Cast - ----------------------------------------------------------------------------- John J. Sweeney 955,724.7929 67,165.5901 0.0000 545,860.9078 Arthur A. Coia 942,574.4258 80,315.9572 0.0000 545,860.9078 John E. Cullerton 953,700.6767 68,273.8616 915.8447 545,860.9078 Terrance R. Duvernay 954,410.7180 67,165.5901 1,314.0749 545,860.9078 Edwin D. Hill 955,035.3538 67,563.8203 291.2089 545,860.9078 Frank Hurt 955,035.3538 67,165.5901 689.4391 545,860.9078 Martin J. Maddaloni 954,021.1910 68,800.5972 68.5957 545,860.9078 A.L. "Mike" Monroe 954,427.4369 68,273.8616 189.0845 545,860.9078 Tony Stanley 954,076.3925 68,273.8616 540.1289 545,860.9078 Andrew L. Stern 954,393.9082 68,273.8616 222.6132 545,860.9078 Patricia F. Wiegert 954,984.3756 67,165.5901 740.4173 545,860.9078 Trustees Alfred Fleischer, Robert Georgine, Frank Hanley, John Joyce, Walter Kardy, George Latimer, H.D. LaVere, Marlyn Spear, Tony Stanley, Linda Chavez-Thompson and Richard Trumka were not up for election in 1998. Their terms continued after the date of the Annual Meeting. Arthur Andersen LLP was ratified as the Trust's Public Accountants by a vote of 1,022,423.5571 for, 0.0000 against, 466.8259 abstentions, and 545,860.9078 votes not cast.
AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS HOUSING INVESTMENT TRUST FINANCIAL STATEMENTS JUNE 30, 1998 AFL-CIO HOUSING INVESTMENT TRUST STATEMENT OF ASSETS AND LIABILITIES June 30, 1998 (Dollars in thousands unless noted; unaudited) ASSETS - ----------------------------------------------------------------------------- Investments, at value (amortized cost $1,760,910) $1,834,236 Cash 557 Accrued interest receivable 13,609 Accounts receivable 409 Prepaid expenses and other assets 1,233 - ---------------------------------------------------------------------------- TOTAL ASSETS $1,850,044 LIABILITIES - ---------------------------------------------------------------------------- Accounts payable and accrued expenses $748 Redemptions payable 84 Refundable deposits 947 Income distribution payable, net dividends reinvested of $9,584 991 - ---------------------------------------------------------------------------- TOTAL LIABILITIES 2,770 Net assets applicable to participants' equity - certificates of participation; authorized unlimited; outstanding 1,663,112 units (note 5) $1,847,274 - ----------------------------------------------------------------------------- Net asset value per unit of participation (in dollars) $1,110.73 - ----------------------------------------------------------------------------- See accompanying notes to financial statements.
SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 1998 (Dollars in thousands; unaudited) FHA MORTGAGES (29.5%) Single Family - ----------------------------------------------------------------------------- Face Amortized Interest Rate Maturity Date Amount Cost Value - ----------------------------------------------------------------------------- 7.75% Jul-2021 - Aug-2021 $1,356 $1,356 $1,392 8.00% Jul-2021 1,391 1,397 1,450 10.31% Feb-2016 77 77 77 11.31% Mar-2016 88 88 88 -------------------------------------- $2,912 $2,918 $3,007 --------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 1998 (Dollars in thousands; unaudited) FHA MORTGAGES (29.5%) Multifamily - ----------------------------------------------------------------------------- Face Amortized Interest Rate Maturity Date Amount Cost Value - ----------------------------------------------------------------------------- 6.50% Aug-2004 $16,923 $16,923 $16,760 6.75% Nov-2037 3,679 3,201 3,721 7.20% Aug-2039 0 0 110 7.43% May-2023 17,889 18,257 18,225 7.50% Nov-2022 7,593 7,781 7,692 7.55% Aug-2012 938 700 938 7.63% Apr-2031-Jun-2037 45,074 45,086 47,555 7.75% Apr-2029-Jan-2038 30,403 30,409 32,067 7.85% Sep-2037 2,619 2,619 2,802 7.88% Mar-2034 12,358 12,546 12,975 7.93% Jul-2035 19,631 19,640 20,620 7.95% Apr-2029 1,729 1,729 1,763 8.00% Sep-2031 - Jun-2038 23,563 23,362 24,782 8.13% Aug-2028 - Apr-2038 36,183 36,135 38,195 8.18% Nov-2036 36,703 36,237 39,141 8.25% Feb-2026 - Sep-2035 36,392 36,419 38,359 8.30% Nov-2027 - Jun-2036 11,212 11,161 11,997 8.31% Mar-2038 22,998 22,666 24,608 8.38% Jan-2027 - Nov-2034 39,128 39,148 41,472 8.40% Apr-2012 - Jan-2028 14,637 14,297 15,403 8.50% Apr-2012 - Feb-2035 13,170 13,024 13,935 8.60% Jan-2028 2,051 2,054 2,195 8.63% Dec-2029 4,247 4,251 4,529 8.70% Feb-2033 2,979 2,979 3,188 8.75% May-2036 - Sep-2036 12,306 12,194 13,144 8.80% Oct-2032 5,647 5,650 5,929 8.88% Sep-2029 - Jun-2036 23,863 23,785 25,270 9.00% Jun-2034 - Nov-2035 16,140 16,058 17,095 9.13% Apr-2031 - May-2035 16,410 16,415 16,994 9.25% Feb-2029 - Jun-2034 9,747 9,747 10,209 9.31% Dec-2032 179 176 188 9.38% Jun-2034 1,870 1,901 2,001 9.40% Jan-2036 9,661 9,667 10,338 9.50% Jul-2027 380 389 406 9.75% Apr-2031 3,604 3,581 3,856 10.00% May-2002 - Mar-2031 5,875 5,875 6,284 10.15% Mar-2034 1,963 1,963 2,042 10.45% Jan-2030 1,220 1,221 1,244 -------------------------------------- $510,964 $509,246 $538,032 ------------------------------------- TOTAL FHA MORTGAGES $513,876 512,164 541,039 -------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 1998 (Dollars in thousands; unaudited) FHA CONSTRUCTION LOANS (14.0%) Multi-family - ------------------------------------------------------------------------------ Interest Rates Maturity Commitment Face Amortized Perm Const Date* Amount Amount Cost Value - ------------------------------------------------------------------------------ 6.75% 6.75% Mar-2021 $1,141 $0 $0 $(13) 6.75% 6.75% Mar-2038 3,123 3,652 3,060 3,612 6.75% 6.75% Jun-2040 1,103 0 0 (15) 6.88% 7.13% Nov-2030 29,545 0 0 126 7.00% 7.00% Apr-2039 6,044 803 850 926 7.13% 7.13% Apr-2039 8,200 6,262 6,262 6,482 7.17% 7.17% Oct-2038 4,905 0 0 0 7.50% 7.50% May-2037 10,145 9,125 9,125 9,663 7.55% 7.55% Nov-2037 9,225 8,185 8,197 8,709 7.63% 7.63% Dec-2027 33,989 31,281 31,029 33,402 7.70% 7.95% Apr-2038 85,622 82,977 81,136 87,471 7.70% 7.70% Oct-2039 12,535 11,200 11,077 11,575 7.75% 7.75% Oct-2037 3,050 3,050 3,046 3,264 7.75% 7.75% Aug-2038 1,452 0 0 0 7.80% 7.80% Feb-2038 21,801 16,289 16,289 17,652 7.88% 7.88% Mar-2037 4,275 3,910 3,913 4,199 7.88% 7.88% Nov-2038 5,282 4,062 4,062 4,273 7.97% 7.97% Jul-2038 4,134 3,971 3,883 4,136 8.25% 8.25% Nov-2036 3,645 3,258 3,261 3,513 8.25% 8.50% Feb-2037 5,265 4,844 4,849 5,216 8.75% 8.80% Mar-2037 29,095 27,030 27,036 28,892 9.25% 9.25% May-2036 20,600 19,414 19,419 20,856 9.90% 10.00% Oct-2032 2,262 2,170 2,173 2,306 ----------------------------------------- TOTAL FHA CONSTRUCTION LOANS $241,4832 $238,667 $256,418 ----------------------------------------- * Permanent mortgage maturity date.
SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 1998 (Dollars in thousands; unaudited) GNMA SECURITIES (29.1%) Single-family - ----------------------------------------------------------------------------- Face Amortized Interest Rate Maturity Date Amount Cost Value - ------------------------------------------------------------------------------ 7.00% Apr-2026-Jun-2028 $14,616 14,616 14,989 7.50% Jan-2025-Jun-2028 149,055 152,807 153,229 8.00% Dec-2009-Jun-2028 221,667 228,881 229,550 8.50% Jul-2021-Aug-2025 34,045 35,074 35,998 9.00% May-2016-Jun-2025 17,348 18,050 18,537 9.50% Aug-2016-Sep-2021 4,792 4,914 5,172 10.00% Jun-2019 35 35 35 11.00% Jul-2015-Sep-2016 170 170 170 11.25% Oct-2015 88 88 88 12.00% Apr-2015-Jun-2015 60 60 60 12.25% Apr-2015 4 4 4 13.00% Jul-2014 4 4 4 13.25% Dec-2014 6 6 6 13.50% Aug-2014 3 3 3 --------------------------------------- $441,893 $454,712 $457,705 --------------------------------------- Multifamily - ------------------------------------------------------------------------------ 7.50% Jul-2037-Nov-2037 13,391 13,405 14,250 7.70% Jul-2036 9,053 9,067 9,655 7.88% Jan-2033-Jul-2039 2,637 2,637 5,115 8.25% May-2032-Sep-2036 7,569 7,639 7,868 8.50% Jan-2027-Jul-2029 13,313 13,419 14,130 8.75% Dec-2026 4,378 4,378 4,477 9.00% Jun-2030-May-2031 12,667 12,121 13,550 10.05% May-2026 1,257 1,257 1,290 12.55% Jun-2025 6,109 6,027 6,246 ------------------------------------- $70,344 $69,950 $76,581 ------------------------------------- TOTAL GNMA SECURITIES $512,237 $524,662 $534,286 -------------------------------------- /TABLE SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 1998 (Dollars in thousands; unaudited)
GNMA CONSTRUCTION LOANS (2.5%) Multi-family - ----------------------------------------------------------------------------- Interest Rates Maturity Commitment Face Amortized Perm Const Date* Amount Amount Cost Value - ------------------------------------------------------------------------------ 6.93% 7.07% Jan-2040 $ 8,460 $ 1,375 $ 1,375 $ 1,683 7.10% 7.10% Oct-2039 42,137 23,177 23,018 24,471 7.13% 7.13% Nov-2038 7,516 6,338 6,264 6,488 7.18% 7.18% Jan-2039 4,095 2,177 2,177 2,259 7.33% 7.76% Nov-2029 27,555 1,508 1,508 2,610 7.63% 7.80% May-2039 15,285 12,071 11,847 13,141 7.80% 8.00% Jan-2039 54,238 34,454 34,472 38,251 8.04% 7.88% Jan-2039 20,958 10,347 10,442 11,814 ------------------------------------ TOTAL GNMA CONSTRUCTION LOANS $91,447 $91,103 $100,717 ------------------------------------- * Permanent mortgage maturity date.
FNMA SECURITIES (10.8%) Single-Family - ----------------------------------------------------------------------------- Interest Maturity Face Amortized Rate Date* Amount Cost Value - ----------------------------------------------------------------------------- 6.50% Mar-2013-Jan-2028 $5,833 $5,864 $5,858 7.00% Jan-2004-Jan-2028 31,911 31,676 32,370 7.50% Dec-2007-Sep-2027 81,926 84,089 84,165 8.25% Oct-2021 155 153 161 8.50% Aug-2021-Dec-2021 379 378 396 9.00% Jan-2024-May-2025 1,402 1,462 1,483 ----------------------------------- $121,606 $123,622 $124,433 -----------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 1998 (Dollars in thousands; unaudited)
FNMA SECURITIES (10.8%) Multi-family - ------------------------------------------------------------------------------ Interest Maturity Commitment Face Amortized Rate Date* Amount Amount Cost Value - ------------------------------------------------------------------------------ 6.50% Sep-2015 $3,728 $0 $0 $0 7.00% Sep-2014 1,675 0 0 34 7.38% Mar-2015 2,145 0 0 43 7.50% Apr-2012-Jan-2015 5,151 1,092 1,082 1,187 7.63% Jun-2008-Feb-2013 4,073 4,058 4,215 7.75% Sep-2006-Apr-2027 7,503 2,394 2,361 2,637 7.88% Jan-2007 471 467 489 8.00% Nov-2019-May-2020 7,170 7,126 7,600 8.13% May-2020 8,317 8,256 8,898 8.25% May-2022-Sep-2025 11,490 10,939 10,939 11,747 8.38% Jan-2022 1,123 1,113 1,224 8.50% Sep-2026 1,535 1,518 1,689 8.63% Sep-2025 10,976 10,983 11,789 9.13% Jul-2012-Sep-2015 12,889 12,852 13,303 9.25% Jun-2018 5,363 5,337 5,900 9.75% Feb-2023 1,968 1,946 1,968 -------------------------------- $68,310 $68,038 $72,723 -------------------------------- -------------------------------- TOTAL FNMA SECURITIES $189,916 $191,660 $197,156 -------------------------------- /TABLE SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 1998 (Dollars in thousands; unaudited)
FHLMC SECURITIES (6.9%) Single-family - ----------------------------------------------------------------------------- Face Amortized Interest Rate Maturity Date Amount Cost Value - ----------------------------------------------------------------------------- 6.00% Mar-2005 $176 $168 $176 6.50% Mar-2013-Mar-2028 5,486 5,506 5,520 7.00% May-2004-Mar-2028 42,483 43,308 43,268 7.50% Nov-2003-Oct-2027 58,442 60,116 60,057 8.25% Dec-2022 471 469 490 8.50% Jul-2024-Jun-2025 7,472 7,524 7,798 9.00% Mar-2025 1,465 1,486 1,548 ------------------------------------ $115,595 $118,577 $118,857 ------------------------------------ Multi-family - ------------------------------------------------------------------------ 8.00% Feb-2009 $8,109 $8,120 $8,271 - ------------------------------------------------------------------------ TOTAL FHLMC SECURITIES $124,104 $126,697 $127,128 ------------------------------------
LOCAL INITIATIVES (0.8%) Multi-family - --------------------------------------------------------------------------- Interest Commitment Face Amortized Rate Maturity Date Amount Amount Cost Value - --------------------------------------------------------------------------- 7.70% Jun-2006-Jun-2029 $41,094 $12,710 $12,711 $13,805 8.00% May-2025 4,910 4,895 5,008 8.25% Jan-2005-Sep-2012 1,456 1,432 1,486 8.38% Feb-2007-Jan-2008 1,799 1,814 1,835 8.63% Jun-2025 1,434 1,434 1,509 9.13% May-2017 695 700 729 9.39% Dec-2023 973 969 1,022 9.50% Aug-2012-Apr-2024 2,187 2,197 2,296 ----------------------------------- TOTAL LOCAL INITIATIVES $26,164 $26,152 $27,690 ---------------------------------- TOTAL LONG-TERM INVESTMENTS $1,699,227 $1,711,105 $1,784,434 ---------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS June 30, 1998 (Dollars in thousands; unaudited) SHORT-TERM INVESTMENTS (2.7%) - ----------------------------------------------------------------------------- Maturity Face Amortized Description Date Rate Amount Cost Value - ------------------------------------------------------------------------------ Commercial Paper Allstate Corp. 1-Jul-1998 6.25% $1,300 $1,300 $1,300 Goldman Sachs Group LP 1-Jul-1998 6.25% 1,000 1,000 1,000 Morgan Stanley Dean Witter & Co 1-Jul-1998 6.25% 7,000 7,000 7,000 George Washington University 14-Jul-1998 5.60% 5,000 5,000 5,000 Kitty Hawk Funding Corp. 22-Jul-1998 5.60% 4,984 4,984 4,984 Ranger Funding Corp. 23-Jul-1998 5.54% 5,103 5,103 5,103 Centric Funding Corp. 24-Jul-1998 5.52% 5,182 5,182 5,182 Corporate Receivables Corp. 24-Jul-1998 5.53% 4,982 4,982 4,982 Kitty Hawk Funding Corp. 30-Jul-1998 5.68% 5,001 5,001 5,001 Merrill Lynch & Co. 31-Jul-1998 5.54% 4,977 4,977 4,977 Corporate Asset Funding Co., Inc. 3-Aug-1998 5.52% 5,059 5,059 5,059 Ford Motor Credit Corp. 2-Sep-1998 5.54% 217 217 214 ------------------------------------------ TOTAL SHORT-TERM INVESTMENTS $49,805 $49,805 $49,802 ------------------------------------------
TOTAL INVESTMENTS ------------------------------------------ Face Amortized Amount Cost Value ------------------------------------------ $1,749,032 $1,760,910 $1,834,236 ------------------------------------------
STATEMENT OF OPERATIONS Six Months Ended June 30, 1998 (Dollars in thousands; unaudited) INVESTMENT INCOME: - ----------------------------------------------------------------------------- Interest: FHA mortgages $20,853 FHA construction loans 11,072 GNMA securities 18,694 FNMA securities 7,958 FHLMC securities 3,892 Local Initiatives 793 Short-term Investments 2,517 Discount and (premium) amortization and other income, net (2,445) - ----------------------------------------------------------------------------- TOTAL INCOME $63,334 ----------------
EXPENSES - ----------------------------------------------------------------------------- Salary and fringe benefits $2,152 Legal fees 180 Consulting Fees 95 Auditing and tax accounting fees 46 Insurance 75 Marketing and sales promotion 250 Program Development 155 Trustee expenses 25 General Expenses 595 - ---------------------------------------------------------------------------- TOTAL EXPENSES 3,573 Investment Income - net 59,761 --------------------- Realized gain on sale of investments: 2,236 --------------------- Net change in unrealized appreciation and (depreciation) on investments 7,728 Net gain on investments 9,964 --------------------- Net increase in net assets resulting from operations $69,725 ---------------------- See accompanying notes to financial statements. /TABLE STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 1998 (Dollars in thousands; unaudited)
INCREASE IN NET ASSETS FROM OPERATIONS - ----------------------------------------------------------------------------- Investment income - net $59,761 Net realized gain on sale of investments 2,236 Net change in unrealized appreciation and (depreciation) 7,728 ------------------ Net increase in net assets resulting from operations 69,725 ------------------ Distribution paid to participants or reinvested from: Investment income - net $(59,761) - ----------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS - ----------------------------------------------------------------------------- Proceeds from the sale of 109,919 units $121,949 Dividend reinvestment of 48,514 units 53,790 Payments for redemption of 9,177 units (10,174) - ----------------------------------------------------------------------------- Net increase from share transactions 165,565 ---------------------- TOTAL INCREASE IN NET ASSETS 175,529 ---------------------- Net assets at the beginning of period 1,671,745 ---------------------- Net Assets at end of period $1,847,274 ---------------------- See accompanying notes to financial statements. /TABLE NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) Housing Investment Trust (the Trust) is a common law trust created under the laws of the District of Columbia and is registered under the Investment Company Act of 1940 as a no-load, open-end investment company. The Trust has obtained certain exemptions from the requirements of the Investment Company Act of 1940 that are described in the Trust's prospectus. Participation in the Trust is limited to labor organizations and eligible pension, welfare and retirement plans that have beneficiaries who are represented by labor organizations. The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATION Investments are presented at value. Value determinations are summarized by specific category of investment as follows: Long-term investments, consisting of permanent mortgages, mortgage-backed securities, construction loans and participation certificates, are valued using published prices, dealer bids, or cash flow models discounted using market-based discount and prepayment rates, developed individually for each security. The market-based discount rate is composed of a risk-free yield (i.e., a U.S. Treasury Note with a weighted average life comparable to the security being valued) adjusted for an appropriate risk premium. The risk premium reflects actual premiums in the marketplace over the yield on U.S. Treasury securities of comparable risk and maturity to the security being valued as adjusted for other market considerations. On loans for which the Trust finances the construction and permanent mortgage, value is determined based on the total amount of the commitment for the term of the construction loan plus the permanent mortgage loan. For construction-only loans, the outstanding principal balance of the loan is used to approximate value, assuming no decline in credit quality. Short-term investments, consisting of commercial paper, that mature less than sixty days from the balance sheet date are valued at amortized cost, which approximates value. Short-term investments maturing more than sixty days from the balance sheet date are valued at the last reported sales price on the last business day of the month or the mean between the reported bid and ask price if there was no sale. Short-term investments maturing more than sixty days from the balance sheet date for which there are no quoted market prices are valued to reflect current market yields for securities with comparable terms and interest rates. Additional information relative to investment terms and credit risks are described more fully in the Trust's prospectus. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. FEDERAL INCOME TAXES The Trust's policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all of its taxable income to its participants. Therefore, no federal income tax provision is required. The total cost of the portfolio of investments for federal income tax purposes approximates the cost of all investments for financial statement purposes. DISTRIBUTIONS TO PARTICIPANTS At the end of each calendar month, pro rata distribution is made to participants of the net investment income earned during the preceding month. Amounts distributable, but not disbursed, as of the balance sheet date are classified as income distribution payable. Participants redeeming their investments are paid their pro rata share of undistributed net income accrued through the month-end of redemption. The Trust offers an income reinvestment plan which allows current participants to automatically reinvest their income distribution into Trust units of participation. Total reinvestment approximated 90 percent of distributable income for the six months ended June 30, 1998. INVESTMENT INCOME Interest income is recognized on an accrual basis. Commitment fees, points and other discounts or premiums resulting from the funding or acquisition of mortgage loans or mortgage-backed securities are accounted for as an adjustment to the cost of the investment and amortized over the estimated life of the mortgage loan or mortgage-backed security. Realized gains and losses from investment transactions are recorded on the trade date using an identified cost basis. 2. TRANSACTIONS WITH AFFILIATES During the six months ended June 30, 1998, certain members of the Trust's staff provided services to the AFL-CIO Building Investment Trust, a Maryland group trust. The total cost for these services and related expenses for the six months ended June 30, 1998, amounted to $693,000. The Trust was reimbursed for all of these costs, except for $338,000, which is included in the accounts receivable balance in the accompanying financial statements. 3. COMMITMENTS The assets of the Trust are invested in short-term investments until they are required to fund commitments for construction loans, mortgage-backed securities or permanent mortgages. At June 30, 1998, the Trust had remaining unfunded commitments of approximately $313,798,000 to fund construction and permanent mortgages, and other investments. The Trust is required to maintain a segregated account of securities in an amount no less than the total unfunded commitments less short-term investments. 4. INVESTMENT TRANSACTIONS (dollars in thousands) A summary of investment transactions for the separate instruments included in the Trust's investment portfolio, at amortized cost, for the six months ended June 30, 1998, follows:
FHA GNMA FHA Const- GNMA Const- FNMA FHLMC Local Mort- ruction Secur- ruction Secur- Secur- Initi- gages Loans ities Loans ities ities atives Balance, January 1, 1998 $510,595 $298,943 $377,463 $63,293 $224,778 $51,066 $12,741 Purchases and construction loan advances, net of discounts - 39,599 215,330 51,454 73,443 103,105 13,739 Change in discounts and premiums (1,098) 674 5,154 95 1,209 2,179 (10) Transfers 59,225 (61,864) 10,458 (7,819) 0 0 0 Principal reductions (56,558) (38,685) (83,743)(15,920) (107,770) (29,653) (318) -------------------------------------------------------------- Balance, June 30, 1998 $512,164 $238,667 $524,662 $91,103 $191,660 $126,697 $26,152 ---------------------------------------------------------------- For the six months ended June 30, 1998, the Trust had net unrealized appreciation in value of investments of $7,728. The accumulated unrealized net appreciation in the value of investments of securities was $73,326 as of June 30, 1998 5. PARTICIPANTS' EQUITY (dollars in thousands) Participants' equity consisted of the following at June 30, 1998: Amount invested and reinvested by current participants $1,772,352 (Gain)loss on redemption of units of participation (1,378) Accumulated unrealized appreciation in the value of investments 73,326 Accumulated undistributed net realized gain on investments 2,236 Accumulated undistributed investment income - net 738 -------------- $1,847,274 -------------- 6. RETIREMENT AND DEFERRED COMPENSATION PLANS The Trust participates in the AFL-CIO Staff Retirement Plan, which is a multi-employer defined benefit pension plan, covering substantially all employees. This plan was funded by employer contributions, at rates approximating 17.4 percent of employees' salaries during the six months ended June 30, 1998. The total Trust pension expense for the six months ended June 30, 1998, was approximately $292,000. The Trust has a tax deferred compensation plan, referred to as a 401(k) plan, covering substantially all employees. This plan permits employees to defer the lesser of 15 percent of their annual salary or the applicable IRS limit. The Trust matches dollar-for-dollar the first $1,350 of employee contributions. The Trust's 401(k) contribution for the six months ended June 30, 1998, was approximately $53,000. 7. BANK LOANS The Trust has a secured $25,000,000 bank line of credit, borrowing under this agreement bear interest at LIBOR plus one-half percent. Five mortgage-backed securities have been pledged as collateral for the line of credit. As of June 30, 1998, the Trust had no outstanding balance on this line of credit. No compensating balances are required. SUPPLEMENTAL INFORMATION Selected Per Share Data and Ratios for the Six Months Ended June 30, 1998, and Years Ended December 31, 1997, 1996, 1995 and 1994 (Unaudited)
PER SHARE DATA - ----------------------------------------------------------------------------- Six Months Ended December 31, June 30, 1998 1997 1996 1995 1994 - ----------------------------------------------------------------------------- Investment Income $40.59 $83.77 $84.10 86.50 87.13 Expenses (2.29) (4.71) (4.99) (5.38) (5.47) Investment Income - net 38.30 79.06 79.11 81.12 81.66 Distribution from investment income - net (38.30) (79.10) (78.76) (80.77) (81.66) Distribution from realized gain on investments (0.48) Net asset value Beginning of period 1,104.30 1,072.98 1,098.53 991.40 1,102.58 Net realized and unrealized gains (losses) on investments. Net increase (decrease) in net asset value 6.43 31.32 (25.55) 107.13 (111.18) - ------------------------------------------------------------------------------ END OF PERIOD $1,110.73 $1,104.30 $1,072.98 $1,098.53 $991.40 - ------------------------------------------------------------------------------
RATIOS - ----------------------------------------------------------------------------- Ratio of expenses to average net assets 0.4%(1) 0.4% 0.5% 0.5% 0.5% Ratio of net investment income to average net assets 6.8%(1) 7.2% 7.3% 7.6% 7.8% Portfolio turnover rate 40.2%(1) 15.3% 20.3% 31.2% 27.5% Number of outstanding units at end of period 1,663,112 1,513,856 1,289,082 1,062,234 943,378 - ----------------------------------------------------------------------------- See accompanying notes to financial statements. (1) Percents are annualized./TABLE [AFL-CIO HOUSING INVESTMENT TRUST LOGO} AFL-CIO HOUSING INVESTMENT TRUST 1717 K STREET, N.W. SUITE 707 WASHINGTON, DC 20006 (202) 331-8055 -----END PRIVACY-ENHANCED MESSAGE-----